Wednesday, August 29, 2012

Iceland’s Anti-Austerity FTW

Iceland For The Win!  Bloomberg Businessweek, hardly a den of Leftist Big Government, reported that Iceland’s approach to economic recovery -- government social programs and legal punishment for the financial elites who drove the country into crisis -- is propelling the country to economic health and widespread prosperity:

Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.

Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.

That this is being reported by Iceland’s main IMF official ought to give more credence to the idea that New Deal-style public programs, capital controls, and legal accountability for elite wrongdoing are superior to the austerity agenda when it comes to economic recovery.  The country put their former Prime Minister on trial for financial mismanagement, and while he escaped the most serious penalties, he was found guilty of one charge, sending the message that irresponsibility will not be tolerated.  Iceland also put the cost burden of recovery mainly on the wealthy bondholders who benefited when times were good:

Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy. The island’s subsequent decision to shield itself from a capital outflow by restricting currency movements allowed the government to ward off a speculative attack, cauterizing the economy’s hemorrhaging. That helped the authorities focus on supporting households and businesses.

Iceland even implemented that bête noire of capitalists, widespread debt relief targeted at homeowners, all the while protecting its European-style welfare state.  The results of all this? 

The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates.

Meanwhile, following the austerity agenda, the United States slouches through it’s fourth year of the Great Recession, while Greece, Spain, and the Eurozone continue to teeter on catastrophe.  Both the case of Iceland and the historical record show that Keynesianism works and neoliberalism doesn’t.  Conclusion: if you are a pro-austerity economist and you have any aspiration to a healthy scientific respect for empirical evidence, it is your professional duty to abandon whatever doctrines you currently hold and adopt theories that accord with observation.  Period. 

Saturday, August 25, 2012

“Re”distribution? No, Just Distribution

One way that conservatives have positioned themselves to win the ideological debate is by successfully defining progressive taxation and social programs as “RE-distribution.”   Allow me to summarize the argument here (this is my own synopsis, not a direct quote of anyone):

Markets, if left undisturbed by government action, automatically establish an equilibrium between supply and demand through the mechanism of competition, and this rewards hard work, intelligence, talent, and ingenuity, thereby remunerating individuals in proportion to the value that they’ve added to the economy.  This is not only socially beneficial, but natural and ineluctable: competitive market forces, rooted in “natural” human self-interest, will always drive things toward the market distribution even when government futilely attempts to create a different distribution.  So, for example, when government raises taxes on corporations to fund social programs, business owners will simply pass those tax costs onto customers in the form of higher prices, causing inflation.  Furthermore, the money has been redistributed away from those who rightly earned it, entrepreneurs who would have invested it, and to those who, by virtue of receiving welfare, didn’t work for it and will probably spend it wastefully.  Thus the capitalist distribution is the natural one and always reasserts itself; any attempt to “redistribute” away from it only causes distortions in the economy and creates disincentives for work and investment and incentives for shiftlessness and free riding.

There are many problems with this argument (see below), but the very first thing to note is that it completely ignores that, in capitalism, there is already a massive redistribution, at the point of the paycheck, away from the workers who create value with the labor of their hands and minds, towards the capitalists whose contribution to creating value is much smaller than the rewards they claim.  CEOs simply do not personally contribute enough value to justify annual salaries in the millions, tens of millions, or hundreds of millions.  And investors who live on their stock earnings don’t contribute any contribution through work, although they do redirect capital investment, which could be better done anyway by worker-controlled cooperative banks that don’t demand outrageous premiums just for moving numbers around on spreadsheets.  I made this argument some months ago and it’s worth repeating here: 

Friday, August 24, 2012

The Court is Mistaken: Breivik is Insane, and Was Made So by His Ideology

A Norwegian court has ruled that right-wing racist, xenophobe, terrorist, and mass murderer Anders Behring Breviek was sane enough to be held criminally responsible for setting off a bomb in Oslo and massacring 77 people on Utoya Island last year.  I have mixed thoughts on the verdict.  Many will be disappointed in the ruling for practical reasons: under Norwegian law, the longest that Breivik can now be sentenced is 21 years, whereas an insanity judgment could have kept him locked up for life. According to the press, however, even his criminal sentence can be extended indefinitely if he is deemed dangerous, and, given the infamy of this case, he probably will spend his life in prison.

My disappointed with the court's decision stems from the declaration of sanity itself.  Breviek himself has said that he doesn't remember much about his actions on that bloody day, and survivors report that he carried out the attack with cold efficiency, more like a machine than a conscious human being aware of his own actions and acting with a sense of volition.  The expert psychologists who evaluated Beivik for the court had mixed opinions, with the first group declaring him a paranoid schizophrenic.  His mental state was clearly not that of a normal, well-adjusted person.  It was in reality, on that day when he slaughtered all those terrified children, that of a cold-blooded psychopath.  Killing mass numbers of innocent children is, in the end, just an insane thing to do, and could only be done by someone who was in reality mentally unstable, whatever the judges' technical legal decision.

The ruling is significant because of the link between ideology and various forms of mental disturbance.  Breivik was clearly driven by a hateful, racist, right wing ideology that he had developed while trolling the Internet.  He built a bubble of self-referential paranoid ideas around himself, convincing himself that Norway was under existential threat from immigrants, Muslims, and multiculturalism.  The court's declaration of sanity is disappointing because we need to understand that ideas have power, and that ideologies can actually drive people into insane mental state where they will commit horrific acts.  And not just individual people; in the 20th century ideologies drove millions of people into collective acts of insane horror.

And it's not just extreme racist ideology or tea party conspiracy theories that are the problem: even moderate conservatives have ideas that are completely disconnected from reality as the rest of us see it.  Conservatives routinely ignore the most well-informed, well-considered consensus evaluations of how the world works.  For example, they don't understand economics, as the austerity agenda proves, and they don't understand climate change and the dangers it poses to civilization and the biosphere.  They start from their premises and never let go of them even when repeated experience, history, and logic prove them wrong: austerity agenda in government budgets simply must be right, because in tough times a person has to tighten his or her belt. Never mind that government isn’t a person and its budget works differently.  And climate change simply must be a lie perpetrated by evil liberal professors, never mind that nine of the last ten hottest years on record have occurred since 2001.  Until we recognize the power of ideas to make people insane, we won’t fully be able to respond to  the dangers posed to the world by conservatism.

Tuesday, August 21, 2012

Theories of Social Change

One of the fundamental differences between progressives and conservatives is that the former are necessarily concerned with creating social change, and the latter with stopping or slowing it.  Progressives call themselves that because they have always been interested in progress, that is, positive social change.  Historically, progressives have aimed to change society to make it more just, by creating economic, political, and social systems lead to human development and good quality of life for all, while conservatives have tried to hinder such change.  

In the 21st century humanity is also struggling with the destructive effects of the massive technological power it has itself unleashed, which threatens nuclear war and environmental destruction, necessitating changes to our social practices and institutions.  Thus, we need positive social change not only for basic social justice but as a matter of survival, to protect our species and environment from the dangers that modernity poses to life on Earth.  

It is therefore necessary for progressives to understand different influences and levers of social change in order to promote positive change and to overcome conservative stratagems and efforts to hinder those changes.  Ultimately, the shape of social institutions themselves must be a subject of conscious and democratic control.  The people ought to be able to democratically deliberate and act on the question, “What kind of society do we want to have?”  Conservatives will say that’s social engineering, but I’m talking about nothing more than went on during America’s own founding period, when it gave itself a new constitution and implements policies to industrialize. 

Many theories of social change have been posited by historians, social scientists, journalists, and common people; I think most people have ideas about how societies can and do change because they would like to see some changes, because they want to other changes to be prevented, or because they just want to understand the world they live in. Yet most, if not all, theories of social change seem to explain only part of what is, in the end, a very complex, multi-causal process.  

Sunday, August 12, 2012

The Romney-Ryan Ticket: Plutocrats in Paradise

Has there ever been a Dynamic Duo who will reinforce each other’s group think, and that of their party, more strongly?  Mitt Romney already had a huge problem identifying with the tribulations of ordinary people, yet rather than choose a running mate to help correct that public image, with Paul Ryan he found a like-minded ideologue who will push him to be even more out-of-touch.  These are two Oligarch Ostriches; look for their heads to remain firmly buried in the sand.

(Plus the phrase “Romney-Ryan” just begs for additional alliteration.  Sorry, couldn’t resist.)

Thus Romney's choice of Ryan bodes well for the Democrats. The world remains in economic doldrums and most Americans' purchasing power has constricted since 2008.  Obama’s lead has widened of late as Romney's approval ratings have fallen with his refusal to release his tax returns, making it clear that he believes himself to be subject to "rich people's rules" rather than the ones we mere mortals obey -- an advantage the Democrats have effectively pressed.  Adding Paul Ryan's crazy Ayn Rand libertarianism to the mix does nothing to negate this Romney negative: it will only put Ryan's unrealistic, numbers-free, and Medicare- and Social Security-busting budget plan into the spotlight.  It's hard to imagine a more anti-middle class ticket, and it speaks volumes about the Republican party's tin ear on people's economic difficulties.

The economic numbers have not been in Obama's favor this year, but Romney’s disadvantages as a candidate are currently strengthening his lead.  I'm going to revise my previous assessment that Obama faced an uphill slog and now say it's his race to lose.  But there are several caveats: Obama's advantage is a function of the poor appeal of his opponents, rather than because he and his party are governing well.  Obama still doesn't have a solid majority locked up, whereas a New Deal 2.0 would've made him a shoe-in with huge coattails for his party.  And regretfully, what this means is that the Beltway insider centrists will learn all the wrong lessons: they will look at an Obama re-election as confirmation of their center-right economic strategy and continue to dismiss "irresponsible populism." Meanwhile the country's  momentum towards greater inequality will continue unabated, along with all the attendant social ills.  One silver lining: perhaps the hitching of Ryan's Objectivist wagon to Romney's Rolls Royce campaign will help discredit libertarianism, if the Romney-Ryan ticket does in fact lose in November.

Thursday, August 9, 2012

Progress Requires an Active Labor Movement and Party

There is a strong correlation between the strength of a country’s organized labor movement and the strength of its political Left and whether its government implements policies that improve the quality of life of common, working people.  This would seem to be true on its face, but it is something that the American Left too often forgets; our activist and intellectual Left is concerned with identity politics almost to the exclusion of considerations of economic class, while the Democratic party, which presents itself as worker-friendly, in reality governs from the center-right and is as nearly pro-business as the Republicans.  This explains the growing inequality and decline of middle- and working-class living standards for the last 30 years.

The case of Brazil is instructive.  Brazil has made impressive economic strides since 2003 under Worker’s Party leader Luiz Inácio “Lula” da Silva and his successor Dilma Rouseff.  It has achieved both strong economic growth and significant poverty reduction.  With a population of 190 million and annual growth rates of around 5%, Brazil has become the world’s sixth largest economy.  It has a diverse economy combining agriculture with the second largest industrial sector in the Western Hemisphere (after the United States).  If you’ve ever flow on an Embraer jetliner, you’ve directly benefitted from Brazil’s surging aerospace industry.  Brazil still suffers from extreme poverty, as evinced by the vast favelas or shanty towns in every major city where millions live in dire conditions with little access to clean water, sanitation, electricity, education, or other public services.  These favelas often butt right up against the walled compounds of the hi-rise condominiums where the upper and upper-middle classes live, a physical juxtaposition that highlights Brazil’s still-extreme inequality.  Yet Lula’s redistribution programs have lifted some 40 million people out of poverty;  the largest and most famous is called the Bolsa Familia or “family allowance” and makes assistance conditional on school attendance. 

In addition to a strong economy, politically Brazil is an increasingly strong democracy; the memory of the military dictatorship that ended in 1986 is recent enough that nobody wants to return to anything like it.  Common people are politically active, with voter turnout in the last two parliamentary elections topping 80%, as compared to American turnout in Presidential elections that is typically in the mid-50%.

Saturday, August 4, 2012

Political Backbone Award: Harry Reid

Senate Majority Leader Harry Reid’s firm, persistent criticism of Romney's refusal to release his tax returns deserves commendation:
“There is a controversy because the Republican presidential nominee, Governor Mitt Romney, refuses to release his tax returns. As I said before, I was told by an extremely credible source that Romney has not paid taxes for ten years. People who make as much money as Mitt Romney have many tricks at their disposal to avoid paying taxes. We already know that Romney has exploited many of these loopholes, stashing his money in secret, overseas accounts in places like Switzerland and the Cayman Islands.
Last weekend, Governor Romney promised that he would check his tax returns and let the American people know whether he ever paid a rate lower than 13.9 percent. One day later, his campaign raced to say he had no intention of putting out any further information…
I understand Romney is concerned that many people, Democrats and Republicans, have been calling on him to release his tax returns. He has so far refused. There is only one thing he can do to clear this up, and that’s release his tax returns.”
Of course, Reid is doing it for political horse race purposes, not out of political principle: Romney is either hiding something damaging or expressing contempt for regular taxpayers, either of which makes him politically vulnerable on this issue, so Reid is pressing his advantage:  
“It’s clear Romney is hiding something, and the American people deserve to know what it is. Whatever Romney’s hiding probably speaks volumes about how he would approach issues that directly impact middle-class families, like tax reform and the economy. When you are running for president, you should be an open book.
Reid’s stance on government transparency here is highly admirable -- I wish I could be assured that he believed it deeply as a matter of principle, and see him commit the Senate to overturning Citizens United and make campaign finance entirely open and transparent to the public -- when you’re running for Congress you should be a open book, too.  Or better yet, Reid could press for a constitutional amendment to fund campaigns entirely from the public treasury.  But at least maybe Reid and other centrists will learn a lesson from this success: taking the initiative and keeping your opponent on the defensive is a lot better than the reverse.  I hope to see things like this for the rest of the campaign.